The John Lewis Partnership has warned that its staff bonus may be in doubt after it reported disappointing sales over the Christmas period in both its Waitrose and John Lewis chains.
In a “weak” grocery market, like-for-like sales at Waitrose edged up 0.4% over the seven weeks to 4 January. However, this was better than the 0.1% increase recorded by Tesco over a similar period with the upmarket chain pointing to strong online sales (+16.7%) and improvements in areas such as product availability.
At John Lewis, overall sales were down 2% on a like-for-like basis. Sales in its Fashion department edged up 0.1% but Home sales were down 3.4% and Electricals & Home Technology slipped 4%. Whilst the chain had a strong Black Friday (+10% year-on-year), it saw “subdued demand” in the subsequent weeks.
In a surprise announcement, the group said the Managing Director of John Lewis, Paula Nickolds, will step down next month.
The partnership has been combining its executive teams behind John Lewis and Waitrose as part of moves to cut costs and utilise its offering across both chains. Nickolds was expected to become Executive Director of Brand next month when the teams merge and Sharon White takes over as Chairman.
John Lewis said today: “After some reflection on the responsibilities of her proposed new role, we have decided together that the implementation of the future partnership structure in February is the right time for her to move on.”
Meanwhile, the group said that whilst annual profits at Waitrose are expected to be broadly in line with last year, it warned that profits at John Lewis will be “substantially” down.
This led to concerns that the group may not pay a bonus to staff for only the second time in its history as its financial year draws to a close.
“The Partnership Board will meet in February to decide whether it is prudent to pay a Partnership Bonus,” said outgoing Chairman Sir Charlie Mayfield. “The decision will be influenced by our level of profitability, planned investment and maintaining the strength of our balance sheet.”
The group had issued a similar warning this time last year but it eventually paid a bonus, albeit the lowest since the 1950s.
Richard Lim, Chief Executive of consultancy Retail Economics, said: “These figures confirm that trading is tough and news that the MD is stepping down could signal just how uncomfortable life is getting.
“Excitable Edgar did little to fire up Christmas sales with declines across non-food and a woeful performance in the online business which barely showed any signs of growth.
“The later timing of Black Friday may ultimately have been the destructive force at play. Consumers appear to have pulled forward gift purchases to take advantage of deep discounts at the expense of Christmas trading.
“What’s more, in this hyper-competitive industry, their price matching promise is likely to have eroded margins further against the backdrop of rising operating costs.
“Waitrose performed better but continues to undergo a transformation in the business. The shining light was an impressive performance in their online proposition.”
NAM Implications:
- Key is the fact that profit share forms crucial part of remuneration package…
- Simply not paying it is not an option.
- Meaning staff that can move on…
- …whilst remaining morale impacts the aisle.
- Watch this space…
